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Jacobs (J) Gears Up for Q2 Earnings: What's in the Offing?

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Jacobs Engineering Group Inc. (J - Free Report) is slated to report second-quarter fiscal 2022 results on May 3, before the market open.

In the last reported quarter, the company’s earnings and revenues lagged the Zacks Consensus Estimate by 2.5% and 7.2%, respectively. On a year-over-year basis, its earnings rose 10.6% but revenues remained flat.

The leading provider of professional, technical and construction services’ earnings topped the consensus mark in three of the last four quarters, with the average being 8.9%.

Trend in Estimates

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has dropped to $1.70 from $1.73 in the past 30 days. The estimated figure indicates a 2.4% increase from $1.66 per share reported in the year-ago quarter. The consensus mark for revenues is pegged at $3.77 billion, suggesting a 6.2% growth from the year-ago quarter’s reported figure of $3.55 billion.

Jacobs Engineering Group Inc. Price and EPS Surprise

 

Jacobs Engineering Group Inc. Price and EPS Surprise

Jacobs Engineering Group Inc. price-eps-surprise | Jacobs Engineering Group Inc. Quote

 

Factors to Note

Jacobs’ second-quarter fiscal 2022 performance is likely to have been aided by investments from the U.S. Infrastructure Act and other economic stimuli. Its strategic focus on transforming itself from an engineering and construction firm to a global technology-forward solutions company is expected to get reflected in the to-be-reported quarter’s numbers. Also, higher-margin backlog, focus on generating efficiencies through digital and technological solutions and solid project execution are expected to have boosted growth.

J has been continuously shifting to digital and leadership in strategic end markets like space exploration, life sciences, cyber and water solutions. Again, the U.S. Department of Defense’s increased focus on strategic data utilization is likely to have driven Jacobs’ growth.

A favorable revenue mix in both People & Places Solutions or P&PS and Critical Mission Solutions or CMS segments and benefits from PA Consulting (which has a solid accretive gross margin profile of nearly 50%) are likely to get reflected in margins.

Segment-wise, higher spending from the transportation sector and accelerated investments toward drinking water, wastewater, flood protection and climate resilience might have aided the company’s fiscal second-quarter performance in the P&PS segment (comprising 60% of total revenues in fiscal 2021). Rapid implementation of digital technologies has been optimizing clients’ operational spending and mitigating their revenue challenges. Further, environmental and green economy projects remained strong.

The Zacks Consensus Estimate for the P&PS segment’s net revenues is pegged at $2,239 million, indicating an increase from $2,140 million a year ago. The Zacks Consensus Estimate for the P&PS segment’s operating profit is pegged at $212 million, indicating a rise from the year-ago quarter’s figure of $202 million.

The Critical Mission Solutions or CMS segment (comprising 36% of total revenues) is expected to have benefited from the consistent performance of the Cyber and Mission-IT business. The company’s CMS strategy has been focused on creating resilient revenue growth and margin expansion by offering technology-enabled solutions aligned to critical national priorities that drive innovative outcomes. Jacobs has been pursuing global energy transition, space-based ISR, intelligence analytics and 5G networks.

For the fiscal second quarter, Jacobs expects revenues for CMS to grow strongly on a year-over-year basis, with underlying growth being much stronger. The Zacks Consensus Estimate for the CMS segment’s revenues is pegged at $1,342 million, indicating growth from $1,310 million a year ago. The consensus mark for the CMS segment’s operating profit is $114 million, flat year over year.

It expects non-allocated corporate costs to get reflected in the quarterly performance due to an increased medical costs, IT investments and other expenses. Jacobs also expects the potential non-cash impairment charge to reflect on quarterly earnings.

What the Zacks Model Says

Our proven model does not conclusively predicts an earnings beat for Jacobs this time around. A combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. Unfortunately, that is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The company has an Earnings ESP of -2.07%.

Zacks Rank: It currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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PHM benefited from gains in revenues, improved gross margin and overhead leverage.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.